From providing finger food to the Welsh Assembly to serving strawberries at Wimbledon, Compass’s operations make it the largest catering group in the world. Last week’s interim numbers not only showed the defensive nature of the business but the cash-generating ability that makes its shares attractive. In the first half, underlying free cash flow rose 5.4 per cent to 368m pounds. This is an important measure of financial performance as it is from this pot that dividends and buy-backs come from. The company has been focusing on cutting costs, although the operating margin was flat in the first half at 7.2 per cent. An improvement is likely in the second half. The US is shaping up nicely and the company generates about 44 per cent of business from the region. Emerging markets are also likely to continue to grow, with organic growth in the segment jumping 12.4 per cent in the first half, more than making up for a 0.4 per cent fall in like-for-like in Europe. Indeed, revenue from fast-growing markets is now almost half the revenue generated from Europe. Trading on a September 2012 multiple of 14.3, falling to 13.1 in 2013, compared with a historical forward , earnings average of 16.7, the shares are a buy, Questor says.

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